Iceland shocked by elite's love of offshore holdings

Cabinet ministers, bankers and CEOs: the offshore companies at the heart of the leaked Panama Papers have drawn large numbers of Iceland's elite into a scandal that has already brought down the country's premier.
The documents from the Panama-based law firm Mossack Fonseca, obtained by the International Consortium of Investigative Journalists (ICIJ), revealed just how many Icelanders had holdings hidden away in tax havens.

That number is astounding: some 600 Icelanders are named in the documents, in a country of just 320,000. That's the highest per capita number for any country, according to Johannes Kristjansson, an independent Icelandic journalist who worked with the Consortium.

In the streets of Reykjavik, people are disgusted.

"It's a small clique, and even after the 2008 (financial) crisis they wouldn't let go. It just confirms that money made during the boom years didn't disappear into thin air," a 50-year-old resident, Kolbrun Elfa Sigurdardottir, told AFP.

"Who are the people who benefited from this system? We all want to know," asked Alli Thor Olafsson, 32.

The offshore companies are part of the legacy from the euphoria that was rampant in Iceland's financial sector in the early 2000s when the country's banks borrowed beyond their means to fund aggressive investments abroad, ultimately causing the 2008 collapse of the three main banks.

According to Sigrun Davidsdottir, a journalist at public television RUV who has been investigating offshore holdings since the 2008 crisis, Iceland's financial advisors were quick to suggest to all and sundry that their money should be placed offshore.

"During the heady years up to 2008, a source said to me that you just weren't anyone unless you owned an offshore company," she wrote on her blog.

- Bad rap for Tortola -

By now, the best-known case is that of ousted prime minister Sigmundur David Gunnlaugsson.
In 2007, his then-future wife, Anna Sigurlaug Palsdottir, placed her inheritance from her wealthy businessman father in an offshore tax haven, the British Virgin Islands, via the Credit Suisse bank.

Gunnlaugsson owned 50 percent of the offshore company, named Wintris, a fact he neglected to disclose as required in April 2009 when he was elected to parliament.

He resigned last week after massive public protests.

Offshore accounts were so well-known in Iceland that the expression "Tortola company" -- referring to the most populated island in the British Virgin Islands -- had been widespread in Icelandic media, though not the extent to which they were used and by whom.

Gunnlaugsson was definitely not the only government official to own an offshore company.
Finance Minister Bjarni Benediktsson owns a company in the Seychelles, while Interior Minister Olof Nordal has one in Panama.

Both have so far managed to hold onto their cabinet posts despite the scandal.

A former central bank governor and ex-industry minister, Finnur Ingolfsson, the head of pharmaceutical group Alvogen, Robert Wessman, as well as journalist Eggert Skulason of the daily DV are all known to be on the Panama Papers list of offshore account holders.

Ingolfsson and Skulason claim they were unaware of their accounts, insisting their affairs were managed by the Luxembourg branch of the Icelandic bank Landsbanki.

The subsidiary has already fallen into disrepute after more than 110 wealthy clients, including the French singer Enrico Macias, accused it of fraud.
All of the Icelanders identified as offshore account holders deny any attempts at tax evasion, insisting they diligently paid their taxes in Iceland.

"It's clear that it's legal," the country's new prime minister, Sigurdur Ingi Johannsson, said in an interview published Monday in daily Morgunbladid.

He nonetheless suggested the possibility of barring Icelanders from placing their money in tax havens.

The country's tax authority admitted meanwhile it was unable to ensure that all income was declared in Iceland.

"There can be problems obtaining (data from tax havens) and in some cases it is even impossible," acknowledged the agency's head Bryndis Kristjansdottir.
Source: AFP